Market Insight

TV providers jostle for position down under

November 20, 2016  | Subscribers Only

David Scott David Scott Associate Director – Research and Analysis, Service Providers & Platforms

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  • SVoD subscribers will outnumber pay TV subscriptions in Australia by the end of 2016
  • Australian SVoD subscribers will grow 60 percent to just under 4.0 million in 2016; Netflix up 86 per cent
  • Netflix faces formidable competition from home grown OTT service Stan and pay TV leader Foxtel

The Australian Subscription Video-on-Demand (SVoD) market is undergoing a major shake-up as the battle for viewers between pay TV and OTT services heats up.

SVoD subscribers will outnumber pay TV subscriptions in Australia by the end of 2016. The Australian SVoD subscriber base will grow 60 percent to just under 4.0 million compared with the previous year according to IHS Markit. By comparison, pay TV subscriptions will rise 13 per cent to nearly 3.7 million over the same period.

The first company to offer subscription-based streaming in Australia was local rent-by-mail operator Quickflix that launched its service in 2011 followed by EzyFlix in August 2013 and Presto, a Foxtel-Seven West Media joint venture in March 2014. By end 2014, SVOD services had signed up just 100,000 of Australia’s 5.8 million broadband households. Within three months, however, two more services had launched (Netflix and Stan) while Presto TV had relaunched at a much lower price.

Increased mainstream advertising, promotional free subscription trials, and heightened media interest around the new services helped boost consumer awareness and demand for SVOD services in Australia in 2015.

A key driver in SVOD gaining traction across the country is the Netflix service. Netflix will grow its Australian subscriber base 86 percent in 2016 to 1.86 million. By 2020, Netflix will edge the 5.0 million-subscriber mark or just over half of the country’s SVoD subscribers. The online video giant’s strong financial position and high-quality original foreign content ensures Netflix will remain a major player in the Australian SVOD market.

 

Our analysis

The Australian SVoD market has already seen some local players fall prey to Netflix. EzyFlix closed its business in August 2015 and the publicly listed Quickflix went into voluntary administration in April 2016. Although the fate of the Australian subscription video pioneer remains uncertain, Quickflix will emerge from administration. US-based Karma Media Holdings announced in October 2016 that it would pay A$1.3 million to take over Quickflix. Deal is expected to reach completion by February 2017.

Whatever form the inevitable market consolidation takes, Netflix will continue to face formidable competition from homegrown OTT players in Australia, including Stan and a new look Foxtel Play service. Players in the traditional TV space back both VOD services. Stan by Nine Entertainment/Fairfax Media and Foxtel Play by Foxtel, Australia’s pay TV leader.

Stan, despite strong competition from Netflix, is expected to grow its subscriber base 66 percent to reach 620,000 paying subscribers by the end of 2016, increasing to just over 1.5 million by 2020. Stan has launched a platform upon which it can build and differentiate the service to fit the specifics of the Australian market.

Despite its smaller budget, Stan is already investing in exclusive, original local content including comedy television series No Activity and the TV adaptation of Australian film production Wolf Creek. In addition, Stan is signing up content to effectively block Netflix from showing several movies and TV series that it shows in the US. For example, Stan signed a long-term, exclusive licensing agreement with Showtime in January 2016 for Australian rights to BillionsCalifornicationDexterHouse of LiesPenny DreadfulRay DonovanThe Affair, and Weeds. Stan also gains access to content from Showtime’s parent company CBS as part of the deal, including Madam SecretaryScorpionBeauty and the Beast and every episode of the Star Trek TV series. This will drive new subscriber numbers.

The rapid rise of SVoD has prompted pay TV leader Foxtel to flex its offering. Foxtel revealed at the 2016 Australian Subscription Television and Radio Association (ASTRA) Conference in September 2016, a new pay TV lite OTT offering for its Foxtel Play service. Lower prices and more flexible packages will provide consumers greater choice and ease of access to Foxtel’s content in a similar offering to that of HBO Now in the US and Now TV by Sky in the UK. Foxtel Play combined with the company’s value-add bundled proposition Foxtel Go will serve just under 1.1 million subscribers by the end of 2016.

Foxtel confirmed in October 2016 that the new look Foxtel Play service will roll out from December 2016. This announcement came the same day as Foxtel revealed it would acquire Seven West Media’s shares in their Presto TV joint venture. Presto has struggled for subscribers against Netflix and Stan. Foxtel will invite Presto’s 290,000 customers to transfer to the new Foxtel Play product from 1 December 2016 prior to the closure of Presto on 31 January 2017.

SVOD is fast becoming a popular way for Australians to watch video content. However, the scale of its success will hinge on how providers promote and program their service locally. It will also be important for SVoD providers to beef-up their local content library, to create original programming for its Australian audience and find the right content proposition and competitive pricing to stand out in Australia’s crowded SVoD landscape. 

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